FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended
March 31, 1996
Commission file number 33-
27665
NYMAGIC, INC.
(Exact name of registrant as specified in its charter)
New York
13-3534162
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification
No.)
330 Madison Avenue,
New York, New York 10017
(Address of principal executive offices) (zip
code)
(212) 551-0600
(Registrant's telephone number, including area
code)
(Former name, former address and former fiscal
years,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
On April 1, 1996 there were 10,694,812 shares of common
stock, $1.00 par value outstanding.
NYMAGIC, INC.
INDEX
Part I. FINANCIAL INFORMATION: PAGE NO.
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 2
Consolidated Statements of Income
March 31, 1996 and March 31, 1995 3
Consolidated Statements of Cash Flows
March 31, 1996 and March 31, 1995 4
Notes to Consolidated Financial Statements 5
Management's Discussion And Analysis of Financial
Condition and Results of Operations 6
Part II. OTHER INFORMATION 8
1
NYMAGIC, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31,
December 31,
1996 1995
ASSETS
Investments:
Fixed maturities available for sale,
at fair value (amortized cost
$348,865,319 and $319,279,410) $352,063,516 $328,649,365
Equity securities at fair value (cost
$28,915,941 and $27,986,694) 35,675,262 33,794,413
Short-term investments 15,283,999 40,862,313
Total investments 403,022,777 403,306,091
Cash 178,041 1,175,024
Accrued investment income 6,379,546 6,110,402
Premiums and other receivables, net 33,806,164 53,254,864
Reinsurance receivables 205,470,282 197,395,689
Deferred policy acquisition costs 11,566,298 11,660,903
Prepaid reinsurance premiums 15,116,070 16,956,441
Deferred income taxes 11,600,254 10,264,908
Property, improvements and equipment, net2,225,448 2,273,538
Other assets 3,682,144 3,425,983
Total assets $693,047,024 $705,823,843
LIABILITIES
Unpaid losses and loss adjustment expenses$414,390,141$417,794,525
Reserve for unearned premiums 73,177,226 79,568,955
Notes payable 11,476,941 12,726,941
Other liabilities 8,876,479 11,947,637
Dividends payable 1,069,481 1,069,181
Total liabilities 508,990,268 523,107,239
SHAREHOLDERS' EQUITY
Common stock $ 14,759,192 $ 14,749,192
Paid-in capital 24,080,359 23,933,587
Unrealized appreciation
of investments (net of deferred income taxes)6,472,3859,865,486
Retained earnings 157,370,021 152,646,915
202,681,957 201,195,180
Treasury stock, at cost,
4,064,380 and 4,057,380,shares (18,625,201) (18,478,576)
Total shareholders' equity 184,056,756 182,716,604
Total liabilities and shareholders' equity$693,047,024$705,823,843
The accompanying notes are an integral part of these
consolidated financial statements.
2
NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three months
ended
March 31,
1996
1995
Revenues:
Net premiums earned $22,974,399 $26,657,797
Commission income 232,558 245,877
Net investment income 5,377,174 5,243,892
Realized investment gains (losses) 1,509,676 (144,672)
Other income 162,009 135,209
Total revenues 30,255,816 32,138,103
Expenses:
Losses and loss adjustment expenses incurred14,013,93417,384,911
Policy acquisition expenses 4,116,457 5,144,012
General and administrative expenses 3,937,759 3,686,981
Interest expense 212,695 128,300
Total expenses 22,280,845 26,344,204
Income before income taxes 7,974,971 5,793,899
Income taxes:
Current 1,690,675 1,193,843
Deferred 491,709 36,968
Total income taxes 2,182,384 1,230,811
Net income $ 5,792,587 $4,563,088
Net income per share $ .54$
.40
Average shares of common stock outstanding10,752,34811,379,106
Dividends declared per share $ .10 $
.10
The accompanying notes are an integral part of these
consolidated financial statements.
3
NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months
ended
March 31,
1996
1995
Cash flows from operating activities:
Net income $ 5,792,587 $ 4,563,088
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for deferred taxes 491,709 36,968
Realized investment (gains) losses(1,509,676) 144,672
Net bond amortization 505,995 345,567
Depreciation 105,313 111,731
Changes in:
Premiums and other receivables 19,448,700 14,441,348
Reinsurance receivables (8,074,593) 11,433,456
Accrued investment income (269,144) 267,427
Deferred policy acquisition costs 94,605 499,811
Prepaid reinsurance premiums 1,840,371 1,321,302
Other assets (256,161) (242,967)
Unpaid losses and loss adjustment expenses(3,404,384)(15,980,603)
Reserve for unearned premiums (6,391,729) (5,763,736)
Other liabilities (3,071,158) 1,012,724
Total adjustments (490,152) 7,627,700
Net cash provided by operating activities5,302,435 12,190,788
Cash flows from investing activities:
Fixed maturities acquired(80,271,609)
(40,593,473)
Equity securities acquired (5,948,355) (5,124,757)
Fixed maturities available for sale, matured3,209,0672,788,412
Fixed maturities available for sale, sold47,388,58228,000,458
Fixed maturities held for investment, matured-----1,190,885
Equity securities sold 6,094,817 5,504,272
Net sale (purchase) of short-term investments25,594,337(1,345,053)
Acquisition of property, equipment
and improvements (57,223) (54,789)
Net cash used in investing activities(3,990,384) (9,634,045)
Cash flows from financing activities:
Proceeds from stock options exercised 156,772 1,378
Cash dividends paid (1,069,181) (1,137,903)
Net repurchase of common stock (146,625) -----
Loan principal repayments (1,250,000) (1,470,588)
Net cash used in financing activities(2,309,034) (2,607,113)
Net decrease in cash (996,983) (50,370)
Cash at beginning of period 1,175,024 367,713
Cash at end of period $ 178,041$ 317,343
The accompanying notes are an integral part of these
consolidated financial statements.
4
NYMAGIC, INC.
Notes to Consolidated financial Statements
1)The interim consolidated financial statements are unaudited
but, in the opinion of management, reflect all material
adjustments necessary for a fair presentation of results
for such periods. Adjustments to financial statements
consist of normal recurring items. The results of
operations for any interim period are not necessarily
indicative of results for the full year. These financial
statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the year ended December 31,
1995.
5
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net premiums earned decreased 14% to $22,974,399 in the
first quarter ended March 31, 1996 from $26,657,399 for the
first quarter of 1995. The decrease in premiums earned
resulted mainly from declines in the aviation, other
liability and inland marine lines of business. Although
gross aviation premiums decreased approximately 10% due to a
softening of rates, net premiums decreased 26% resulting from
additional reinsurance costs. These costs included additional
reinstatement costs required as a result of gross loss
experience and costs involved in canceling and restructuring
the Company's aviation reinsurance program. Inland marine
premium decreased 59% in 1996 which is consistent with the
Company's decision in the prior year to withdraw from writing
the larger multilocation assureds. The other liability line
decreased as a result of the soft casualty market which
allowed for a decline in premium production and ocean marine
premiums grew 9% mainly as a result of additional production
in the hull class.
Losses and loss adjustment expenses incurred as a
percentage of net premiums earned were 61.0% for the three
months ended March 31, 1996 as compared to 65.2% for the
first quarter of 1995. Improved net loss experience in the
Company's core ocean and aviation lines contributed to the
overall decline in the loss ratio. The inland loss ratio in
1996 was beset by storm losses resulting from the severe
weather during the past winter season.
Policy acquisition costs as a percentage of net premiums
earned for the three months ended March 31, 1996 were 17.9%
as compared with 19.3% for the same period of the prior year.
The decrease in the ratio reflects the decreasing share of
expenses relating to the inland marine line of business which
has a larger percentage of acquisition costs and the
increasing share of the ocean marine line which has a lower
percentage of acquisition costs to net premiums earned than
other lines of business.
Interest expense increased to $212,695 for the three months
ended March 31, 1996 from $128,300 for the same period of the
prior year as a result of an increase in loan principal
outstanding.
Net investment income for the three months ended March 31,
1996 increased by 3% over the same period of 1995 as a result
of a larger invested asset base offset by a decrease in
investment yield in the Company's fixed maturity portfolio
resulting from lower rates obtained on securities purchased
in 1995.
General and administrative expenses increased by 7% in 1996
over the first quarter of 1995 primarily as a result of the
increasing costs associated with the Company's self-insured
medical plan and increases in bad debt write-offs.
Realized investment gains of $1,509,676 for the three
months ended March 31, 1996 mainly result from the sale of
appreciated equity securities.
The Company reported net income of $5,792,587 or $.54 per
share for the three months ended March 31, 1996 as compared
to net income of $4,563,088 or $.40 per share for the same
period of 1995.
6
NYMAGIC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTINUED
The Company believes that short-term investments of
$15,283,999 together with its line of credit will enable the
Company to meet its current cash requirements.
Premiums and other receivables, net decreased to
$33,806,164 as of March 31, 1996. Improved cash flows at
the MMO pool level, declines in premium writings and
increases in ceded reinsurance payable contributed to the
overall decline in receivables.
Unrealized appreciation of investments, net of deferred
income taxes, at March 31, 1996 decreased to $6,472,385 from
an unrealized depreciation of investments of $9,865,486 at
December 31, 1995. Declines were recorded in fixed
maturities available for sale resulting from the weak bond
market in 1996.
The Company adheres to investment guidelines as prescribed
by the finance committee of the board of directors. Such
guidelines were conservatively designed to provide the
Company with adequate capital growth and sufficient liquidity
to meet existing obligations. In addition, the guidelines
provide for a portfolio of investment grade securities.
The Company repurchased 7,000 shares of common stock,
pursuant to the Company's common stock repurchase plan,
during the first quarter of 1996 at market prices ranging
from $20.63 and $21.38.
The insurance pools participated in the issuance of
umbrella casualty insurance for various Fortune 1,000
companies in the period from 1978 to 1983. Depending on the
accident year, the insurance pools' maximum net retention per
occurrence ranged from $250,000 to $500,000. The Company's
effective pool participation on such risks varied from 11% in
1978 to 30% in 1983. At March 31, 1996 and December 31,
1995, the Company's net loss and loss adjustment expense
reserves for Asbestos/Pollution policies amounted to $7.2
million and $7.1 million, respectively. As of March 31,
1996, the Company had approximately 1,000 policies which had
at least one claim relating to Asbestos/Pollution exposures
with an insignificant number of claims filed or resolved in
1996. Net loss and loss adjustment expense payments on
Asbestos/Pollution policies amounted to $127,000 and $326,000
for the three months ended March 31, 1996 and March 31, 1995,
respectively. The Company believes that the uncertainty
surrounding Asbestos/Pollution exposures, including issues as
to insureds' liabilities, ascertainment of loss date,
definitions of occurrence, scope of coverage, policy limits
and application and interpretation of policy terms, including
exclusions, all affect the estimation of ultimate losses.
Under such circumstances, it is impossible to determine the
ultimate loss for Asbestos/Pollution related claims and, as
of March 31, 1996, no meaningful range of ultimate loss can
be determined. Given the uncertainty in this area, losses
from Asbestos/Pollution related claims are likely to
adversely impact the Company's results from operations in
future years and may vary materially from such reserves
reported as of March 31, 1996. However, as of March 31,
1996, the Company believes that, in aggregate, the unpaid
loss and loss adjustment expense reserves as of March 31,
1996, allow for an adequate provision and that the ultimate
resolution of Asbestos/Pollution claims will not have a
material impact on the Company's financial position.
7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits
None
(b)Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
NYMAGIC, INC.
(Registrant)
Date:May 13, 1996 /s/ Mark W.
Blackman
Mark W.
Blackman
(Chief Executive
Officer)
/s/ Thomas J.
Iacopelli
Thomas J.
Iacopelli
(Chief Financial
Officer)
8
